{"id":3403,"date":"2023-12-18T19:30:36","date_gmt":"2023-12-18T19:30:36","guid":{"rendered":"https:\/\/economicherald.net\/?p=3403"},"modified":"2023-12-18T19:30:36","modified_gmt":"2023-12-18T19:30:36","slug":"asx-gold-miners-smash-worlds-biggest-producers-on-costs-share-price-gains","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=3403","title":{"rendered":"ASX gold miners smash world\u2019s biggest producers on costs, share price gains"},"content":{"rendered":"

Ever wonder why record high gold prices haven\u2019t translated to booming share prices and investor returns?<\/p>\n

Since 2009, mining costs for the world\u2019s biggest gold producers have risen in line with the spot price, leaving little extra money available for shareholders.<\/p>\n

This is according to Metals Focus\u2019 Gold Peer Group quarterly analysis, which includes global leaders Agnico Eagle, AngloGold Ashanti, Barrick Gold, Endeavour Mining, Gold Fields, Harmony, Kinross, Newmont, Polymetal and Sibanye Stillwater.<\/p>\n

All in sustaining cost (AISC) is an imperfect but solid metric used by investors to compare producers and project developers.<\/p>\n

In 2000, the average AISC for the Metals Focus peer group to produce an ounce of gold was ~US$300.<\/p>\n

In 2012, AISC for these majors ballooned to US$900\/oz. It kept rising, hitting a record high US$1,447\/oz in Q3 this year.<\/p>\n

Global average #gold<\/a> all-in-sustaining costs rose to US$1,342\/oz in Q3\u201923 \u2013 a new record high in our series. While costs remain elevated, we continue to see a slowing trend in cost growth. See the charts here: https:\/\/t.co\/9qKZ2DkHMN<\/a> pic.twitter.com\/hyH4kTCUoC<\/a><\/p>\n

\u2014 Krishan Gopaul (@KrishanGopaul) December 18, 2023<\/a><\/p>\n\n

It has caught the big miners by surprise. In August 2021, the world\u2019s largest gold miner Newmont predicted AISC to fall +13% to between US$800\u2013$900\/oz from 2023.<\/p>\n

Source, Newmont, AUGUST 2021 INVESTOR PRESENTATION.<\/p>\n

Instead, it went the other way, touching US$1,400\/oz in Q3 this year.<\/p>\n

\u00a0<\/p>\n

Shareholder margins peaked in 2020<\/strong><\/h2>\n

Metals Focus\u2019 \u2018shareholder cash cost\u2019 includes all-in-sustaining-costs, project capital expenditure, cash taxes, interest, and royalties.<\/p>\n

Anything left over is available to pay dividends, repay debt or be used for corporate activity.<\/p>\n

Comparing shareholder cash costs to the gold price from 2009 to Q3.23, it is apparent that costs have risen with the gold price, leaving little money available for shareholders:<\/p>\n

Source: Metals Focus<\/p>\n

For Q3.23, shareholder cash costs were US$1,800\/oz, down 5% compared to the previous quarter, but 8% higher year on year.<\/p>\n

This represented a positive cash margin of US$116\/oz, or 6% compared to the gold price. The cash margin peaked in Q3.20 at US$575\/oz.<\/p>\n

Since the end of 2020, this conversion ratio has been falling, in effect generating negative cash flow to the rising gold price, Metals Focus says.<\/p>\n

\u201cIn conclusion, our gold mining peer group has faced substantial headwinds over the past few years,\u201d Metals Focus says.<\/p>\n

\u201cCosts have risen largely in-line with the gold price, and, in our opinion, capital investment will have to increase to maintain production.\u201d<\/p>\n

\u00a0<\/p>\n

The good news: divvies should make a comeback regardless<\/h2>\n

There is upside though, as gold majors complete a decade-long drive to pay off debt.<\/p>\n

\u201cDebt reduction is now largely complete, and dividends should benefit,\u201d Metals Focus says.<\/p>\n

\u201cNearly all the companies in our peer group are now paying regular dividends.<\/p>\n

\u201cHowever, they remain relatively low. We calculate that for our peer group at the end of Q3.23, the implied dividend yield was 3.3%.\u201d<\/p>\n

\u00a0<\/p>\n

What is a dividend yield?<\/h2>\n

Dividend yield is\u00a0a stock\u2019s annual dividend payments to shareholders as a percentage of the stock\u2019s current price.<\/p>\n

For example: $10\/sh stock with 33c in dividends per year = 3.3% divvy yield.<\/p>\n

It is a good basic measure used by investors to compare income stocks.<\/p>\n

US$47bn capped Newmont (NYSE: NEM)<\/strong> has a current yield of 3.91%, with an average of 2.76% over the past five years.<\/p>\n

But investors must look beyond the headline numbers. High divvy yields can be misleading when they are the result of a special one-off payment, or a declining stock price.<\/p>\n

South African platinum-gold miner Sibanye Stillwater (NYSE:SSW)<\/strong>, for example, tops the peer list with a 7% yield, but the stock is down +50% YTD and has actually slashed dividends as it grapples with declining PGM prices.<\/p>\n

\u00a0<\/p>\n

How do the ASX top gold stocks compare on costs, share price, and divvies?<\/h2>\n

It has been hard graft for the world biggest gold miners, with most of the peer group \u2013 except for Gold Fields, Harmony, and Kinross \u2014 either treading water or posting double share price digit losses in 2023.<\/p>\n

Meanwhile, our short list of +$1bn capped dividend paying Aussie gold stocks have enjoyed strong double digit gains, with Africa-focused Perseus (ASX:PRU)<\/a> the only loser.<\/p>\n

Costs are also better at the top end:<\/p>\n

Source: Gold Road Resources.<\/p>\n

However, yields lag. Below we compare these ASX locals against the peer group yardstick of US$1,447\/oz ASIC in Q3, and well as an implied average dividend yield of 3.3% across the peer group.<\/p>\n

<\/div>\n
CODE COMPANY AISC (Q3) AISC +\/- (QUARTER ON QUARTER) CURRENT DIVVY YIELD DIVVY YIELD 5 YR AVERAGE NST NORTHERN STAR $1,939\/oz (US$1,260\/oz) 13% 2.02% 1.65% EVN EVOLUTION MINING $1,612\/oz (US$1,056\/oz) -15% 1.08% 2.46% PRU PERSEUS MINING $1391\/oz (US$937\/oz) -6% 1.93% n\/a GOR GOLD ROAD RESOURCES $1,682\/oz (US$1132\/oz) 4% 0.87% n\/a RMS RAMELIUS RESOURCES $1,975\/oz (US$1330\/oz) 20% 1.20% 1.23% <\/div>\n

WordPress Table Plugin<\/a>
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Ever wonder why record high gold prices haven\u2019t translated to booming share prices and investor returns? 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